You are a free subscriber to Me and the Money Printer. To upgrade to paid and receive the daily Capital Wave Report - which features our Red-Green market signals, subscribe here. Have All of Us Gotten Bitcoin Wrong?There's something that's been bugging me about Bitcoin for eight years... it took a slipped disc and a day on the floor to articulate it...
Dear Fellow Traveler: On Sunday, CrossBorder Capital’s Michael Howell published a piece highlighting how Bitcoin remains the most liquidity-sensitive asset on the planet. I’ve long agreed with that premise, watching Bitcoin prices ebb and flow with the rise and fall of Howell’s liquidity cycles in the post-2008 financial world. Howell’s argument is compelling and draws on his usual comprehensive dataset. And his case is simple: track Global Liquidity, track the Fed’s Reserve Management Purchases, track Treasury QE, track PBoC injections, and you can model where Bitcoin is headed. He sees 2026 as a year to buy Bitcoin at any price weakness. The logic is clean, the charts are tight, and the trade makes sense. But on Sunday, running through Bitcoin’s ebbs and flows over the years, a different question surfaced. I was thinking about the recent pullback from all-time highs… the massive run in 2020… and how reliably Bitcoin has tracked Howell’s liquidity cycles for more than a decade. So the questions hit as I lay on the bathroom floor with a back spasm… What if I’m wrong about Bitcoin? What if we keep treating Bitcoin as an asset… modeling it, trading it, hedging it, when it’s acting like something else entirely? What if it doesn’t matter whether it’s in a bubble or if it’s even investable? What if everyone is wrong about what it really is at its core… Hello Back Pain…Stay with me here. But before we get going, know, this is not a buy-or-sell argument. It’s really a question for discussion about how this system works. Howell is right that Bitcoin is extraordinarily sensitive to liquidity. But go one step further with the implication. At its most basic level, Bitcoin helps convert monetary excess into volatility rather than social or economic stress. It might not seem like much of a statement on the surface, but that distinction matters. When governments monetize debt, that money has to go somewhere. But not every destination is acceptable. If excess liquidity pours into food prices, people riot. Suppose it goes into energy prices, well, inflation spirals. Into housing, social cohesion breaks. Into wages, policy tightens aggressively, and sometimes violently. If it pours into Treasuries, funding markets distort. Into equities, inequality becomes political. Those other assets are load-bearing. They affect daily life, voting behavior, and system stability. Bitcoin doesn’t do any of that. But… But… But… Market CapitalizationAt this point, many people hear the phrase “Bitcoin matters” and immediately assume I think Bitcoin is large enough to drive the macroeconomy. That’s not the claim. The claim is very different. It’s that Bitcoin is shaped in a way that makes it a safe place for volatility to live and capital to flow (quickly…). Those are completely different statements. A sewer does not need to be bigger than the city. It just needs to exist. Forget 15 years of slogans about decentralization. That has not been Bitcoin’s primary role... nor has it been the outcome. Instead, it has acted as a pressure valve, almost too perfectly. Bitcoin prices can surge or crash violently and fast, and almost nothing breaks. No rent hikes. No grocery shock. No wage negotiations. No CPI impact. And there is no immediate policy response (unlike all those other assets above). Bitcoin is financially loud, but economically quiet. All that happens is that liquidity ebbs and flows through it like a tide. This does not mean Bitcoin prevents inflation elsewhere. It means Bitcoin provides an outlet for marginal, speculative liquidity that does not transmit directly into the prices people live on. We have seen this dynamic play out in real time. In 2020 and 2021, stimulus checks, suppressed yields, and rapid balance sheet expansion collided with limited productive capacity. Some of that liquidity went into goods. Some went into housing. And some went into equities. But a meaningful share rushed into assets that could absorb size quickly, trade continuously, and fail visibly without failing consequentially. Bitcoin was one of the cleanest expressions of that release… (Scarce assets do this.) The same pattern appeared after the 2023 banking stress. Emergency facilities stabilized deposits and credit creation remained muted. Liquidity did not flood into wages or consumption. Bitcoin surged anyway, not instead of stabilization, but alongside it. The claim is not that Bitcoin crowds out every other destination for excess liquidity. It’s that, at the margin, it offers a path that is faster, less regulated, and less socially transmissive than most alternatives… Bitcoin is not virtuous, and it’s not perfect. People are clearly speculating about the transmissions… and still not seeing how and why its prices ebb and flow (which Howell lays out). All the while, it has become a pressure outlet alongside an expanding money supply and persistently loose fiscal and monetary policy, because it:
Bitcoin allows excess money to express itself as price volatility rather than real-world inflation. Liquidity always finds the path of least resistance. Bitcoin has become a clear path. This leads to an uncomfortable question... If Bitcoin functions as a pressure valve for excess liquidity, then it is not disrupting the monetary regime… as the Winklevoss Brothers and every other evangelist promised us. Instead, Bitcoin may be helping that system endure. Bitcoin’s volatility is tolerated because its costs are politically invisible. In that sense, Bitcoin may be less a revolutionary alternative than an emerging stabilizer within the very system its evangelists claim to oppose. Whether this outcome is emergent or merely tolerated will be the real question as we continue to face future liquidity shocks and policy responses. Most debates about Bitcoin get stuck on first-order questions. Is it a hedge? Is it money? Is it a bubble? Is it useful? Those questions don’t address the one I thought about while on the floor after my back seized up as my wife returned from the pharmacy with my prescription...
That’s a political economy question, not a crypto one. Systems must always be judged by their outcomes, not their narratives. And systems under pressure tend to discover outlets that fail visibly without failing consequentially, just enough to keep the load-bearing structures intact. I’m interested in people’s opinions… It was just something I thought about on a Sunday… and figured I’d write about it. Just remember, I reserve the right to call myself an idiot for asking this political economy question long before you do… Stay positive, Garrett Baldwin About Me and the Money Printer Me and the Money Printer is a daily publication covering the financial markets through three critical equations. We track liquidity (money in the financial system), momentum (where money is moving in the system), and insider buying (where Smart Money at companies is moving their money). Combining these elements with a deep understanding of central banking and how the global system works has allowed us to navigate financial cycles and boost our probability of success as investors and traders. This insight is based on roughly 17 years of intensive academic work at four universities, extensive collaboration with market experts, and the joy of trial and error in research. You can take a free look at our worldview and thesis right here. Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.
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